Energy efficiency has taken a leading role in the effort to cut energy use and reduce carbon emissions, but high upfront costs still impede its growth.

To address that issue, the federal government offers funding to help implement more programs. A new study outlines how state governments can best use these funds.

“Retrofitting America’s Homes: Designing Home Energy Programs that Leverage Federal Climate Investments with Other Funding” was published in May 2024 by the American Council for an Energy-Efficient Economy (ACEEE), the AnnDyl Policy Group and the Building Performance Association. The paper outlines how states can maximize the impact of federal funds to lower utility bills and cut climate pollution.

Jennifer Amann, co-author of the report and a senior fellow in ACEEE’s buildings program, said that federal funding for residential energy retrofits can make a “huge difference.” However, she adds that states must “put it to use effectively.”

The paper notes that billions of dollars of new federal funding created or expanded through the Infrastructure Investment and Jobs Act of 2021 and the Inflation Reduction Act of 2022 provide funding to support residential retrofits. The funding helps achieve retrofits through financing, incentives, installation of efficiency measures, workforce training and program support.

The paper recommends strategies for states to leverage these funds by “braiding and stacking” them with existing state, local, private and nonprofit resources. Other funds are available from a variety of sources including green banks, housing trust funds, state and local programs and tax incentives, utilities, healthcare funds and financing institutions. When combined into a “capital stack,” these funds can provide a wealth of resources for residential retrofits.

According to the paper, funding can help meet several fundamental objectives in the larger goal of advancing residential energy retrofits. These include workforce training and development, offering rebates and incentives plus affordable financing to homeowners, addressing equity issues in energy retrofits and others.